todays cement reearch from Asia
Cement Price Slightly Increased by 0.1% wow; Cement price in Changchun up RMB 20/t ??
According to China Cement Association, in March 12 2011, domestic cement price maintained at RMB 381.9/t, slightly up 0.1% wow. P.O. 42.5 cement price in Hefei reduced slightly by RMB 20/t to RMB 430/t while P.O. 32.5/42.5 cement price in Changchun increased by RMB 20/t to RMB 290/330/t. P.O. 32.5 and 42.5 cement price in Shaanxi has been corrected down by RMB 50/t to RMB 290/310/t. ??
Cement price in East China maintained stable in line with our expectations. We consider when Spring constructions come, cement trading volume would increase and cement price corrections would be limited. Cement price in East China, South China, Central China and Northeast China, where new capacities are limited, would stabilize first, while cement price in Southwest China and Northwest China, where new capacities in 2010 were large, would be still under pressure in 1H11. Currently, estimated GP/T in East China and South China still maintained at high level. CNBM’s subsidiary North Cement might achieve around 30mn tons capacities in Northeast China, mainly focusing on Heilongjiang and Jilin, accounting for 14% of its total capacity in 2011. As a result, cement price hike in Changchun benefited CNBM (03323.hk) most. ??
In Jan-Feb 2011, domestic fixed asset investment (FAI) reached RMB 1.74trillion, up 24.9%, faster than our expectations, mainly due to strong FAI in railway, property, and highway, boosting cement demand expectations. In Jan-Feb, FAI in property, railway, and highway reached RMB 425bn, 58.6bn and 97.9bn, up 35.2%, 45.3% and 17.6% respectively. ??
Currently, our investment rating for cement industry is “Outperform”. We consider high property price risk began to release and public house investment began to supplement the slow growth of commodity house investment. Cement price might not go strong nationwide till 1-2Q after PPI peaks or till peak season in 4Q11. Currently, if cement price could maintain stable, cement stock could deliver good results, up largely yoy. We consider cement stocks would begin to reflect strong FY10 and 1Q11 results and the favorable expectations that more public house projects would start nationwide in 2H11. Our investment rating for Anhui Conch (00914.hk), CNBM (03323.hk), Shanshui Cement (00691.hk), and Asia Cement (00743.hk) are “Accumulate” , Accumulate”, “Accumulate”, and “Buy”. Our TP for Anhui Conch (00914.hk), CNBM (03323.hk), Shanshui Cement (00691.hk), and Asia Cement (00743.hk) are HKD 45.0, HKD 24.0, HKD 7.5 and HKD 6.0, representing 15.6x, 12.9x, 12.7x and 14.9x 2011E PE respectively.
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